$66.1bn Stimulus package: what you need to know

The Government yesterday released a second, far reaching
$66.1 bn stimulus package that boosts income support payments, introduces
targeted changes to the superannuation rules, provides cash flow support of up
to $100,000 for small business employers, and relaxes corporate insolvency
laws.

The stimulus measures are not yet legislated. Parliament
will reconvene on Monday 23 March.

The Prime Minister has warned that there are no “quick
solutions” and that business should prepare for 6 months of disruption.

In Summary

Business

Tax-free payments up to
$100,000 for small business and not-for-profit employers. An increase in the previously announced initial tax-free payments for
employers to a maximum of $50,000. In addition to this, a second round of payments
will be made up to a maximum of $50,000, accessible from July 2020.

Solvency safety net – temporary 6 month increase to the threshold at which creditors
can issue a statutory demand on a company from $2,000 to $20,000, and an
increase in the time companies have to respond from 21 days to 6 months.
Directors also are provided with temporary relief from personal liability for
trading while insolvent for 6 months.

Access to working capital – Introduction of a Coronavirus SME guarantee scheme protecting
financial institutions by guaranteeing 50% of new loans to SMEs.

Sole traders and
self-employed eligible for Jobseeker payment – the
eligibility criteria to access income support relaxed for the self-employed and
sole traders.

Temporary relief from some Corporations
Act requirements

Individuals

Early release of
superannuation – individuals in financial distress
able to access up to $10,000 of their superannuation in 2019-20, and a further
$10,000 in 2020-21. The withdrawals will be tax-free and will not affect Centrelink
or Veterans’ Affairs payments.

Temporary reduction in
minimum superannuation draw down rates – superannuation
minimum drawdown requirements for account based pensions and similar products
reduced by 50% in 2019-20 and 2020-21.

Deeming rates reduced – from 1 May, superannuation deeming rates reduced further to a
lower rate of 0.25% and upper rate of 2.25%.

A temporary coronavirus
supplement of $550 will be paid to existing income support recipients (people
will receive their normal payment plus $550 each fortnight for 6 months).

A second one-off stimulus
payment of $750 will be paid automatically from 13 June 2020 to certain income
support recipients (in addition to the payment made from 31 March 2020).

Eligibility for access to
income support eased to include sole traders and the self-employed, and to
those caring for someone infected or in isolation.

Waiting periods and assets
tests temporarily waived.

Bankruptcy safety net – temporary 6 month increase to the threshold for the minimum
amount of debt required for a creditor to initiate bankruptcy proceedings
against a debtor from $5,000 to $20,000.

The Government has flagged that additional stimulus packages
will be required.

In detail

Support for business

Tax-free payments up to $100,000 for employers

From:
28 April 2020

Eligibility:
Small and medium business entity employers and not-for-profit entities, with an
aggregated annual turnover under $50 million.

The
Government has increased the previously announced measures to provide cash flow
support to business.

Now,
eligible businesses with a turnover of less than $50 million will initially be
able to access tax-free cash flow support, with the minimum amount being
increased to $10,000 and the maximum amount increased to $50,000 (previously
$2,000 to $25,000). However, additional support will be provided in the July –
October 2020 period so that eligible entities will receive total minimum
support of $20,000 and up to $100,000.

In order
for a business to qualify for this support it must have been established prior
to 12 March 2020. The rules are more flexible for charities because the
Government recognises that new charities might be established in response to
the pandemic.

The cash
flow support measures will be provided in the form of a credit in the activity
statement system. The support will be provided in two phases.

The
first phase ensures that eligible employers receive a credit equal to 100% of
the PAYG amounts withheld from salary and wages paid to employees during the
relevant period, up to the maximum amount of $50,000.

The
second phase ensures that eligible employers receive another series of credits,
equal to the credits that were received under the first phase. For example, if
a business received $40,000 of credits in the first phase it will receive a
further $40,000 of credits in the second phase. These additional credits will
be spread over two or four activity statement periods, depending on whether the
employer lodges on a quarterly or monthly basis.

If a
business pays salary and wages to employees but is not required to withhold any
tax then a minimum payment of $10,000 will be made in the first phase and a
further payment of $10,000 will be made in the second phase.

The credits
are automatically calculated by the ATO and employers will need to lodge an activity
statement to trigger the entitlement. If the credit puts the business in a
refund position the excess amount will be refunded by the ATO within 14 days.

Businesses
that lodge activity statements on a quarterly basis will be eligible to receive
credits in the first phase for the quarters ending March 2020 and June 2020.
Credits in the second phase will be available for the quarters ending June 2020
and September 2020. The minimum $10,000 payment will be applied to the first
lodgement.

Business
that lodge on a monthly basis will be eligible for the credits in the first
phase for the March 2020, April 2020, May 2020 and June 2020 lodgements.
Credits in the second phase will be available for the June 2020, July 2020,
August 2020 and September lodgments. The minimum $10,000 payment will be
applied to the first lodgement.

Eligibility
for the measure will be based on prior year turnover. We will have to wait for
the legislation for the finer details.

Not-for-profit employers, including charities, with an
aggregated turnover under $50 million will also be able to access the cash flow
support.

Solvency safety net

A safety net has been put in place to protect businesses in temporary
financial distress as a result of the pandemic by lessening the threat of
actions that could unnecessarily push them into insolvency and force the
winding up of the business. These include:

A temporary 6 month increase to
the threshold at which creditors can issue a statutory demand on a company from
$2,000 to $20,000.

The time a company has to
respond to statutory demands will increase from 21 days to 6 months.

For 6 months, directors will be
provided with temporary relief from personal liability for trading while
insolvent.

See also bankruptcy safety
net below

It will be more important than ever for business to stay on
top of their debtors.

Debts incurred will still be payable by the business. Only
those debts incurred in the ordinary course of the business will be subject to
the safety net measures.

Temporary relief from Corporations Act requirements

The Treasurer has been given a temporary instrument-making
power to amend the Corporations Act to provide relief or modifications
to specific compliance obligations.

ASIC has announced measures for those companies with a
31 December financial year that need to hold their AGMs by 31 May 2020,
providing a two month no action period and enabling hybrid virtual AGMs.

Individuals

Early release of superannuation

From mid-April, individuals in financial distress will be able
to access up to $10,000 of their superannuation in 2019-20, and a further
$10,000 in 2020-21. The withdrawals will be tax free and will not affect Centrelink
or Veterans’ Affairs payments.

To be eligible to access your superannuation you need to
meet the following requirements:

you are unemployed; or

you are eligible to receive a
job seeker payment, youth allowance for jobseekers, parenting payment (which
includes the single and partnered payments), special benefit or farm household
allowance; or

on or after 1 January 2020:

you were made redundant; or

your working hours were reduced
by 20% or more; or

if you are a sole trader — your
business was suspended or there was a reduction in your turnover of 20% or more.

For those eligible to access their superannuation, you can
apply directly to the ATO through the myGov website from mid-April.

Time limited fortnightly $550 ‘coronavirus supplement’

For the next 6 months, the Government is introducing a new Coronavirus
supplement to be paid at a rate of $550 per fortnight. This supplement will be
paid to both existing and new recipients in the eligible payment categories.

The payment will be made to those receiving:

Jobseeker payment (and those
transitioning to the jobseeker payment)

Youth allowance jobseeker

Parenting payment

Farm household allowance

Special benefits recipients

In addition, eligibility to income support payments will be
expanded to:

Permanent employees who are
stood down or lose their job

Casual workers

Sole traders

The self-employed

Contract workers who meet the
income test

The Government notes that these criteria could include those
required to care for someone affected by the Coronavirus.

Asset testing has also been reduced and will be waived for 6
months. Income testing will still apply.

The payment is not available if you have access to any
employer entitlements such as annual or sick leave or income protection
insurance.

Second $750 payment to households

The Government is now providing two separate $750 payments
to social security, veteran and other income support recipients and eligible
concession card holders residing in Australia (see the full list here). The payment will be exempt from
taxation and will not count as income for the purposes of Social Security, Farm
Household Allowance and Veteran payments.

Payment 1 from 31 March 2020 (previously announced on 12 March): Available to people who are
eligible payment recipients and concession card holders at any time between 12
March 2020 to 13 April 2020;

Payment 2 from 13 July 2020: Available to people who are eligible payment recipients and
concession card holders on 10 July 2020.

The payments will be made automatically to those that meet
the criteria.

Bankruptcy safety net

A temporary 6 month increase to the threshold for the
minimum amount of debt required for a creditor to initiate bankruptcy
proceedings against a debtor will increase from $5,000 to $20,000. In addition,
the time a debtor has to respond to a bankruptcy notice will be temporarily
increased from 21 days to six months.

Where someone declares their intention to enter voluntary
bankruptcy, the period of protection from unsecured creditors will be extended
from 21 days to 6 months.